I don’t like budgets.
There. I said it.
I really don’t like budgets. I’ve found they just never work for me. It was really hard trying to budget when I was working casually and my income changed from week to week but even with the stability of a constant wage that rarely changes, I still found budgets difficult.
I could never work out how much to allocate to certain areas. For me, expenses like water bills, rates, mortgage repayments etc were easy to budget because like my wage, they rarely changed. But things like my car expenses were very hard to budget. Some weeks I’d do 150 km of driving so my petrol costs would be relatively small, but other times I’d drive over 600 km so my petrol costs quadrupled. Unfortunately petrol is a necessity for me – I couldn’t just call up work and say “sorry, can’t purchase more petrol this week, not coming into work today.” If only!
These types of issues are what has prompted me to not budget, but to keep track of my spending.
Every expense I note down in a spreadsheet. It all gets divided into categories such as groceries, eating out, petrol, medical, bills, alcohol, clothing and misc. The reason I do this is so I can see what I’m spending each month and on what. The spreadsheet also has formulas in it so I can put in my monthly wage and it will subtract all my spending so I can see whether I’m living within my means or whether I’m supplementing my income with credit which I then have to pay off using the following months pay.
Personally for me I find this method much better. Its clear to me where my money is going but it’s not so limiting that if I have a slightly larger water bill that I end up struggling.
It also gives me a good idea of my spending habits in the months I don’t have any major bills and this pattern is what prompted me to save proactively for bills. Now as part of my monthly savings I put away money for future bills. I was able to do this by printing out all my bank statements for a year roughly adding up how much each bill cost for the year and work out how much to allocate to save each month. For example my water bills come quarterly and are usually about $300 each. My 4 water bills come to about $1200 for the year so I added $200 just to be safe to make it $1400 and then divided by 12 and that total is $116.67. So every month I put away approximately $115 just for the future water bill. And I do this with every bill so approximately 1/6 of my wage is put away to use on bills.
The thing I really love about doing this is that the money grows in the savings account so when a bill comes, I rarely want to use the money that’s saved. Instead I tend to look at my spreadsheet and work out where I could possibly save that money. It may be something as small as not eating out twice in that month and only buying one bottle of wine that week instead of two.
Doing things this way has really made me appreciate the value of money especially when you sacrifice a relatively small amount in order to be able to do something else. In the end I saved an additional $1200 last year just on my water bill by using this method and my partner and I were able to use that money to go away for a much needed break.
Ultimately the road to making smarter financial decisions comes down to what works for you. It’s important to be aware of your limitations when it comes to money and finding a solution that maximises your strengths and minimises your weaknesses.
Do you like budgets or do you have another way of keeping onto of your finances?